There are three distribution channels: direct, short, and long. These three distribution channels can coexist in a single distribution strategy.
Direct channels refer to sales that are made directly from producer to consumer. This concerns different sectors of the economy from primary to tertiary: sale in a craftsman’s shop-workshop, sale at the farm, sale at markets, fairs and shows by producers, etc.
The main advantage of this direct circuit is that it eliminates all intermediaries and therefore ensures large margins for the producer, who is free to set his selling price. It also makes it possible to create a more personal relationship between producers and consumers, to make production methods known, to promote the know-how specific to the company. For the seller who is also the producer, this direct link with customers allows him in vivo to see what pleases customers, what they expect from the products, what are the obstacles to purchasing or, on the contrary, the triggers, etc.
There are also drawbacks to direct sales, the main one being the obligation to store their products at their place of work or in a room, which induces additional expenses linked to the real estate cost of storage and compulsory insurance.
Short circuits are developing more and more. You have noticed that to escape the proliferation of intermediaries, small producers join forces in collectively managed points of sale. Whether it is AMAP, farmers’ markets, pop-up shops, or others, new short circuits are flourishing. They mingle with traditional short circuits such as restaurateurs, small shops, street vendors, etc. Here too, the idea is to limit the margins due to intermediaries.
The short circuit, therefore, has a unique intermediary between the producer and the consumer. It requires from the producer a storage capacity for its goods but also great reactivity for its deliveries to limit stock outs at points of sale.
In the context of sustainable development and local consumption, the short circuit is popular with consumers just like the direct circuit.
Long circuits are those which involve more than one intermediary. Their major advantage is to free the producer from the costs associated with marketing and sales. It also makes it possible to reach customers who are otherwise inaccessible due to their geographic distance, their consumption habits, or other factors.
The disadvantages of long circuits are real. The question of the profit margin which returns to the producer is the problem mainly posed by this type of circuit. In the case of farmers, long circuits turn out to be catastrophic since the producer is not free to set the selling price to the end customer or even to the various intermediaries. Thus, many farmers, for lack of sufficient distribution channels, find themselves forced to sell at a loss when, at the same time, the major distribution brands and the food industry are earning significant margins.
Being in control of the distribution of its products and services is therefore essential for the vitality of a company.
There are different types of distribution channels: omnichannel, multi-channel, cross channel. Refer to our articles dedicated to distribution channels for more information.
Depending on the distribution strategy chosen by the company, distribution takes place on an intensive, exclusive, selective, or franchise basis. The distribution method must of course be consistent with the chosen distribution channel but also with the positioning of the product and the company to correspond to the commercial strategy.
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